The chart that shows why the Federal Reserve cut interest rates

So the Federal Reserve cut interest rates by 25 basis points, taking the Fed funds rate from 4.25% to 4%.

In the lead up to the decision (which was well trailed) inflation hawks were posting mocking posts on twitter which went like this:

Fed set to cut rates this week…
With stocks at record highs.
Credit spreads near record lows.
Gold at record highs.
Bitcoin near record highs.
And the unemployment rate at 4.3%

But the key driver of the Fed's decision was likely the following chart:

source

At the start of the year, some sectors like software stopped hiring as they increased their use of AI for basic/junior tasks. But now it looks like multiple industries have stopped hiring.

The only reason the official unemployment rate is as "low" as it is, is because immigration has gone into reverse. Migrants who lose their jobs and go home don't count in the unemployment figures as they are no longer physically in the US (they'll show up in the unemployment stats of their home country).

The S&P is thus over-valued.

What about inflation? Well, as the US goes into recession, prices should drop as people curb their spending. Retailers will have to eat the tariffs instead of passing them on, to keep market share.